Both gold and silver hit their respective highs shortly before 4:00 p.m. in Hong Kong during their trading day on Wednesday. As I mentioned in my commentary yesterday, volume was pretty chunky for that time of day, so no doubt the New York bullion banks were in there to keep a lid on things. They were successful. From that point, both metals ran into a couple of waves of selling... most notably the one that started at the London silver fix at 7:00 a.m. Eastern time. Once New York opened, both metals attempted to rally, but didn't get far... as both small attempts to break out where sold off. The charts for both metals looked similar. Here's the one for silver.
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The shares didn't do much either... spending the entire trading session within 1% of their opening price. The HUI chart for yesterday tells all.
(Click to enlarge)
Gold open interest on Tuesday rose 5,636 contracts on big volume of 147,332 contracts. Total open interest is now back over 500k to 504,187 contracts. Silver o.i. rose 2,218 contracts also on big volume of 40,378 contracts. Total silver o.i. is now 136,015 contracts. IF all this is reported in a timely manner, these numbers should be in tomorrow's Commitment of Traders report, as Tuesday was the cut-off for the report. I'm not optimistic... especially considering what happened with last Tuesday's numbers.
The CME Daily Delivery Report showed that 53 gold and one [1] silver contract will be delivered tomorrow. There were no changes in either the GLD or SLV ETFs. The U.S. Mint checked in with some major additions to their eagle numbers. Gold eagle production rose by 19,500 to 50,000... and one ounce silver eagle production rose by 285,000 for a month-to-date total of 892,000. The changes in inventories at the Comex-approved warehouses were not worth mentioning.
The usual New York gold commentator had the following report yesterday, but it was filed at noon, and I've had nothing since... "India was only an importer during the morning... suggesting that Indian dealers, reflecting world gold this morning, were met with serious scrap supplies. This was despite the rupee firming and the stock market up another 1.2% to a 17-month high. It's gained 79% this year."
"With gold commentators generally far more aware of India's crucial gold role than they were a few years ago, considerable attention is being paid to the piteous cries from Indian bullion dealers about how poor business is. These complaints are warranted; but from the perspective of overall gold market analysis, the issue is always India's willingness to step in if gold declines. Someone else being prepared to pay a higher price is not a concern. Nothing so far seen indicates an important decline will be needed to trigger strong Indian buying."
"Japan continued to sell... and, more importantly, the 'general public' cut another 2.146 tonnes [11.3%] from their long, bringing it down to only 16.863 tonnes. It is a curious fact that the 'general public' in Japan never goes short. Some sort of extreme is being approached -- a bullish extreme, at least in yen."
"Early 2008 only saw two days [of open interest] over 500,000 lots [3/14/08 was 506,515]. To get higher levels, a return to the first storming of the $1,000 bastion in early 2008 is necessary. These are serious times." [Yes, they are! - Ed]
Someone sends me Enrico Orlandini's market commentary on a daily basis. In his comments yesterday, he said the following... "but what’s even more shocking is the fact that the interest of our [U.S.] debt will more than likely exceed US $450 billion for the fiscal year 2009 and that is significantly more than the estimated US $300 billion in tax revenues flowing into the government coffers. That means that the US cannot even service its debt without turning to the printing press." [Shocking indeed! - Ed]
I have three stories today... two of which are gold-related.
The first is a piece from The Telegraph in London that was posted over at Kitco late yesterday. "It is renowned for its glitzy clientele and up-market Knightsbridge location, but shoppers at department store Harrods will, from today, be able to buy the ultimate luxury accessory – gold bars." The headline reads "Harrods to sell gold bullion for first time"...
I see that bad-boy-Barrick Gold made an announcement the other day... "the pricing of $1.25 billion in debt securities comprised of: $400 million of 4.95% notes due 2020 and $850 million of 5.95% notes due 2039. All debt securities will be issued by BPDAF and will be guaranteed by Barrick. The net proceeds from this offering will be advanced to wholly-owned subsidiaries in the Barrick group and will all be used to further reduce the liability related to Barrick's floating spot-price (fully participating) gold contracts."
A posting by "Dave from Denver" over at truthingold.blogspot.com pretty well sums up the situation... and the link is here.
The last story is from The Economist out of London. The headline reads "Credit in America: Slim pickings, no appetite". In a nutshell, the story notes that the level of credit is dropping, bank lending is contracting, loan losses are climbing, and people are paying down debt and saving more. They conclude the article thusly... "With loan losses unlikely to peak until well into 2010 and banks likely to keep failing until at least 2011, the real credit crunch may still lie ahead." [And that's a very optimistic time line as well. - Ed] I thank P.S. for sending me this story... which is well worth the read... and the link is here.
The state is the great fiction by which everybody tries to live at the expense of everyone else. - Frederick Bastiat
Yesterday was basically just another day off the calendar. The boyz showed up in the Far East to nip a potentially large rally in the bud, and then sold gold and silver off going in the New York open. Looking at Thursday's Far East action and the London open at the moment, it seems to be a replay of yesterday, as volume is pretty decent right now, though not as heavy as Wednesday morning.
If you think I'm still nervous about this grotesque short position in both gold and silver... you would be right about that. The U.S. dollar has lost almost a full cent in the last three days and the gold price has not been allowed to go anywhere. I'm still sitting on the proverbial fence... but would not be surprised to wake up any given morning to find gold either up $50... or down $50... and I could give excellent reasons for either scenario. But looking at both the gold and silver price charts right now, if I were to bet a dollar, it would be that an interim top is in.
I hope your Thursday goes well, and I'll see you here tomorrow.
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